Nokia Sees Demand Cooling For Telecoms Gear -- 2nd Update
February 11 2016 - 6:21AM
Dow Jones News
By Christina Zander
Nokia Corp. warned on Thursday of an impending slowdown in the
telecommunications-equipment sector amid growing worries about the
health of the global economy, just as the Finnish company's
integration of the recently acquired Alcatel-Lucent SA gathers
speed.
"The first quarter, in particular, looks quite challenging as
customers assess their [capital-expenditure] plans in light of
increasing macroeconomic uncertainty," said Nokia Chief Executive
Rajeev Suri.
"We see a flattish capex environment for all addressable markets
in 2016," Mr. Suri said, underlining less buoyant activity in China
now that the rollout of new-generation wireless networks is nearly
complete in the country.
The Finnish group's wary outlook echoes recent comments from
other technology companies and comes days after management
disappointed investors with its forecast for how much revenue it is
set to gain from its intellectual-property portfolio after a patent
deal with Samsung Electronics Co.
It contrasts with Nokia's robust performance at the end of last
year, with the group reporting a steep rise in fourth-quarter
profit to EUR1.79 billion euros, inflated by EUR1.3 billion in
proceeds mostly from the sale of its mapping business last year to
a consortium of German auto makers.
Excluding that gain, net profit rose 53% to EUR498 million in
the three months to end-December, ahead of market expectations, and
up from EUR325 million in the same quarter a year ago. Growth at
Nokia's patent-licensing business helped offset lower demand for
its telecom-network equipment.
Nokia said it is too early to provide an outlook for the new
combined company--Nokia in the final stages of completing its $16.6
billion takeover offer for Alcatel-Lucent--but will update
investors in around three months time.
But Nokia did say at the start of the month that, including the
patent pact with Samsung, it expects to receive at least EUR1.3
billion in cash between 2016 and 2018 related to settled and
continuing arbitration regarding its intellectual property, well
below some analysts' expectations.
The disappointing outlook for its patent activities underscores
how testing the coming months could prove for the telecom-equipment
supplier as well as its Nordic rival Ericsson AB.
Both companies are under pressure to provide telecoms companies
with a broader range of equipment, from wireless gear to Internet
routers, but have opted for different solutions to achieve that
goal.
While Nokia has agreed a takeover of rival Alcatel-Lucent,
Ericsson has struck a broad technological and commercial
partnership with Cisco Systems Inc. which falls short of a merger.
Ericsson, a leader in wireless equipment, has agreed to put its
global sales force at the disposal of Cisco, which dominates the
market for Internet gear such as routers and switches, but has a
much smaller retail footprint.
"Obviously, the Ericsson/Cisco approach means they can do what
they want to do faster, but anything they do within product
development will be slow, " said Sylvain Fabre, analyst at Gartner
Research.
Nokia's full merger with Alcatel-Lucent will take longer to get
off the ground, but once it is done, the company should be able to
develop products faster, Mr. Fabre said
For Nokia, Alcatel-Lucent is at least finishing its life as an
independent company in robust health, surpassing a long-delayed
goal of reporting positive free cash flow for an entire year in
2015 and fulfilling its turnaround plan. The Franco-American group
reported net profit of EUR589 million euros, or 18 cents a share,
more than double net profit of EUR271 million, or 8 cents a share,
a year earlier.
Nokia repeated a previous assessment that the tie-up would
result in merger-related benefits worth around EUR900 million by
2018.
"We have been operating as a combined company for a month,"
Nokia's Mr. Suri said.
Nokia said on Wednesday that it controls 91.25% of the share
capital of Alcatel-Lucent. Nokia needs to own 95% of the stock to
squeeze out the remaining shareholders.
The Finnish company said shareholders will receive an ordinary
dividend of at EUR0.16 a share for 2015 plus a special dividend of
EUR0.10 a share, up from EUR0.14 a share in 2014
--Sam Schechner contributed to this article.
Write to Christina Zander at christina.zander@wsj.com
(END) Dow Jones Newswires
February 11, 2016 06:06 ET (11:06 GMT)
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